During the 2008 Financial Crisis, approximately 15 million Americans lost their jobs and the subprime mortgage crisis forced 4 million homes went into foreclosure.
In response to the Great Recession, sweeping regulatory reforms led the federal government to place Fannie Mae and Freddie Mac under financial conservatorship in an effort to stabilize the housing market and improve the financial standing of both organizations.
Historically, Fannie Mae and Freddie Mac have operated as government-sponsored enterprises (GSEs), working to enhance housing affordability by purchasing mortgage loans from lenders. However, the Trump administration has recently renewed efforts to take both entities public.
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Bill Ackman, founder of Pershing Square Capital Management, is adamant that of the federal control of these organizations is no longer necessary. He views privatization as a way to remove these liabilities from the government’s balance sheet.
However, privatizing Fannie Mae and Freddie Mac could have far-reaching consequences for an already unpredictable housing market with elevated mortgage rates.
With discussions targeting a public offering underway, Ackman and the Trump administration are hoping to quell fears of rising mortgage rates and reaffirm commitments to shareholder value.
Ackman is not opposed to privatization.
Image source: Siskin/McMullan via Getty Images
Trump Administration and Ackman push to privatize Fannie Mae and Freddie Mac
After a failed attempt to privatize Fannie Mae and Freddie Mac during his first presidential term, Trump began making another play to take both GSEs off of the federal government’s balance sheet.
Successful privatization could shrink the federal deficit anywhere between $250 billion and $300 billion, per estimates from the Wall Street Journal and Ackman’s own analysis.
Ackman—whose firm holds a significant financial stake in Fannie Mae and Freddie Mac—stands to gain over $1 billion if a privatization deal is achieved, and has continued to express support for the deal.
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In a recent post on X — formerly known as Twitter —he defended his vocal support of ending the financial conservatorship of Fannie Mae and Freddie Mac, and insisted that majority of the funds from an IPO would benefit small shareholders.
“While the media often depicts Pershing Square as having wealthy investors, our funds are held by thousands of small shareholders as well as pension funds and other fiduciaries that invest on behalf of retirees and other small investors,” Ackman wrote in a post earlier this month.
“While the press and some politicians attempt to portray the F2 [Fannie Mae and Freddie Mac] release from conservatorship as a windfall for the rich, the vast majority of the value created here will go to small investors,” he continued.
The White House aims to take Fannie and Freddie public without raising mortgage rates
Treasury Secretary Scott Bessent is set to meet with Securities and Exchange Commission (SEC) and the Federal Housing Finance Agency (FHFA) on June 17th to discuss the fate of Fannie and Freddie.
The Trump administration has assured investors and the general public that the federal government will maintain its oversight of both organizations and will honor implicit mortgage guarantees in the event of a public offering.
Related: Fannie Mae predicts major mortgage rate changes are coming soon
Some experts believe Trump may seek to take Fannie and Freddie without ending the financial conservatorship, to soften any blows to the housing market and already rising mortgage rates.
Tim Pagliara, author and shareholder, highlight that this approach provides some degree of a safety net. “Allowing these entities to operate in conservatorship is a strategy that they probably talked about with the investment bankers on their primary concern, which is mortgage rates going up,” he told Politico. “It’s like putting training wheels on a bike.”
Ackman echoes this sentiment, reiterating that he expects the administration to act in the best interest of shareholders, should the organizations become privatized.
“The notion that the Trump administration would act in a manner to wipe out F2 [Fannie Mae and Freddie Mac] investors for an uncertain and likely suboptimal outcome is extremely unlikely in our view,” he noted.
Related: Veteran fund manager unveils eye-popping S&P 500 forecast
